Congress Gets Serious About Defending Trade Secrets

The Defend Trade Secrets Act (DTSA) has been slowly wending its way through Congress, and it is looking as though it has a good chance of becoming a law at this point. It has bipartisan support and has now passed the Senate 87-0. It is now being considered by the House of Representatives.

Currently, there are two levels of laws governing trade secrets, and they have very different benefits for trade secret owners. The federal law is a criminal law that focuses on preventing international espionage. At the state level, the Uniform Trade Secrets Act (PDF), which has been adopted by most of the states, is a civil law. It focuses on providing monetary and injunctive remedies for trade secret owners who have experienced or may soon experience trade secret theft, regardless of the source. Some states also provide for criminal penalties. The end result is that most companies that are not operating in either agriculture or high technology (two areas particularly susceptible to international espionage) rely on a patchwork of state laws to help them protect their trade secrets.

What does the DTSA do, exactly? It creates, for the first time, a private cause of action for misappropriation of trade secrets at the federal level. This means that trade secret owners will be able to sue for trade secret violations in federal court rather than in state court, which will in turn create a more uniform treatment of trade secrets nationwide.

This bill will benefit most, but not all, trade secret owners by opening up a federal forum for litigation. This is because the federal law applies only to trade secrets that are currently used, or intended to be used, in interstate or foreign commerce. (Congress has the authority to regulate interstate, but not intrastate, commerce under the Constitution.) If your business is small enough that it operates only within one state, and you cannot make a showing that you have some effect on interstate commerce, you are stuck with whatever body of law your state has in place about trade secrets. The states generally have broadly diverging case law despite the near-uniformity of the statutes. And if you are in one of the states that hasn’t adopted the Uniform Trade Secrets Act, you might not like the outcome; older laws tended to be very skeptical of trade secrets as a form of intellectual property. All that said, at least you know what you have to do to protect your trade secret because the laws of only one state apply; the federal bill, if it becomes law, offers that kind of reassurance to businesses that operate in more than one state.

If the bill becomes law, it will create a more stable atmosphere in which to do business, as it will be clearer what constitutes a “reasonable” level of protection for a particular type of business or type of trade secret. If your business relies heavily on trade secrets and you like the idea of uniformity, this is a good time to contact your House of Representatives delegation and let them know that you support the Defend Trade Secrets Act.

What do you think? Would you rather be able to sue in federal court for trade secret violations, or are you happy with the current “50 ways of doing things” setup?

How Do I Protect My Idea? Part IV: Trade Secrets

Internet Law - Trade Secret - Protect My Idea

You have a brilliant idea. With all your might, you are making it grow. You nurture it with your time, your energy, your hopes, your sweat, your dollars and your dreams.

This idea? Its time has arrived.

When you have put so much creativity, time and energy into something, you want to know that it is as well-protected as possible. My job as your attorney is to help you with the “how.” Sometimes, you know what kind of protection will work best for your idea. Sometimes, you don’t, or you aren’t sure which of your options is the best. This four-part series is a brief introduction to the various types of intellectual property. Today’s topic: trade secrets.

Trade secrets are often ignored in the excitement surrounding the federally registrable types of intellectual property, but this is a mistake. Trade secrets can be among the more versatile types of protection, and are the only way to protect ideas, as opposed to the expression or physical embodiment of those ideas. Trade secrets protect:

Information and/or ideas that: 1) have actual or potential economic value if they are kept secret; 2) cannot be easily ascertained by others who are using proper means; 3) are minimally novel; and 4) are the subject of reasonable efforts to maintain them as secret.

Trade secrets are an excellent choice for protecting an invention or discovery that does not meet the rigorous novelty standards of patent law, so long as it is not easy to reverse-engineer. They are also ideal for certain types of software, tests, recipes, and other intellectual property that is possible to keep secret.

How does one obtain trademark protection? It is simple enough in theory: all you need to do is keep the material secret using reasonable efforts. However, what constitutes reasonable efforts varies depending on the nature of the secret and the size of the company. In general, protection involves legal safeguards such as nondisclosure agreements and physical safeguards such as locks. Maintenance is also facially straightforward: continue to keep the material secret, and take action against anyone who threatens to reveal it (e.g., get an injunction). You should consult with an attorney about how best to protect and maintain your trade secrets and what to include in your nondisclosure agreement.

The greatest benefit of trade secret protection is that it is the only way to protect certain types of intellectual property, such as ideas or inventions that are not sufficiently novel to obtain patent protection. Trade secret protection can be combined with copyright or patent protection (at least until the point of patent registration). Trade secrets can also last indefinitely; the recipe for Coca-Cola, for example, has been maintained as a trade secret for over one hundred years.

The greatest drawback of trade secrets is that they are destroyed by being revealed. There are some remedies for this, but an unhappy former employee has the potential to do a great deal of damage to a company whose most important intellectual property is protected by trade secrets.

Well-known intellectual property protected as a trade secret includes the formula for Coca-Cola and the recipe for Thomas English Muffins’ “nooks and crannies.”